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Chapter 5
Regulations are rules that government agencies issue to implement laws.
Businesses spend a lot of time and money making sure they comply with laws and regulations and do not face unwanted liability.
1. Corporate law2. Tax law3. Intellectual property law4. Consumer law5. Commercial law6. Licensing and zoning law
Not all companies are alike.
How is the business organized?Sole proprietorshipsPartnershipsCorporations
Simplest kind of business Owned by a single individual, or
proprietor. Often are small businesses or entrepreneurs.
Easy to start, simply begin doing business. Advantages- control the entire
business/keep all profits/pay fewer taxes than other kinds of businesses.
Disadvantages- Full responsibility (debt, failure, sickness)
Association of 2 or more persons who jointly own a for-profit business.
Under law, “persons” can be corporation or another organization or individual
Uniform Partnership Act – governs general partners requires them to by owned by two or more parties and share in the profits.
Share responsibility making decisions
Pays less in taxes than a corporation
MAY have an easier time getting a loan than sole proprietorship
Disadvantage- unlimited liability (even if partner can not pay debt you are still liable) and disagreements.
A business formed under state or federal statutes that is authorized to act as a legal person. Owners have LIMITED liability, meaning
they cannot lose their personal resources if the corporation fails, only the corporation loses.
Advantages- Stockholders limited liability and a share
of profits. Stockholders have no management
responsibilities. Corporations can raise money by selling
stock. Generally have an easier time getting
credit than any other type of business
Disadvantages- Must comply with many more federal
and state laws than other types. Must register with a state govt. agency
to begin a business (sole proprietor does not)
Pay more taxes than any other type of business. They pay special taxes to the state and federal govt. as well as tax on profit.
The type of ownership managers choose for their businesses often depends on the types of taxes involved.
Taxes are monies paid by corporations and individuals used to fund government programs and services.
Income tax (most important) Taxes levied against a business’s profits. Profits $100,000 and Tax 26% , then
amount =?
Withholding Federal Taxes Businesses collect taxes from workers Can vary from state to state Without the help of business, it would be
very difficult for the govt. to collect taxes from workers.
Property tax Taxes levied against the property,
buildings, or land owned by a business. Based on assessed valuation (valued by
tax assessor) of building or land. Taxes may hurt profits, businesses often
pass on cost to consumers
Businesses are protected by intellectual property laws
Patents Document issued by the federal government
to inventors and companies that gives them the exclusive rights to make, use, and sell their inventions for 17 years.
When 17 years is up, other companies can begin selling that invention.
The inventor of each type of new product must apply for another patent.
Trademarks Word, name, symbol or slogan a business
uses to identify its own goods and set them apart from others. Companies must apply to Fed Govt.
Good for ten years and must be renewed.Copyrights
Protection provided for a creative work, such as literary works, musical compositions, plays, dances, paintings, movies, maps, and computer programs.
Good for the holder’s life plus 70 years, after that is becomes “public domain”.
Consumers are individuals who buy goods and services for their own use.
Federal Trade Commission (FTC) Takes action against a company if it
receives enough consumer complaints to establish a “pattern of wrongdoing.”
Sales rules created by FTC ▪ Used Car Rule – requires dealers to tell
customers important information about a used car.
Includes FDA which protects consumers against problems with mislabeled and impure foods, drugs, cosmetics, and medical devices.
Fair Packaging and Labeling Act requires manufacturers of foods, drugs, cosmetics, and medical devices to clearly label products with the name of the manufacturer, the contents, and the amount of package contains.
Contracts Agreement between two parties to carry
out a transaction (ex: Sale of goods from seller to buyer)
Anyone entering into a contract must know what is in the contract and ensure it is properly prepare.
Often difficult to break and can be taken to court if broken.
Uniform Commercial Code – specified requirements for a contract.
Regulates who can operate a businesses and where owners can set up shop
Licensing Way to limit and control people who plan to
enter certain types of businesses (i.e. restaurants)
Building codes Regulate business through physical features
or structures of buildingZoning
Regulates where a building can be built through ordinances (commercially zoned areas versus residential)
Answer questions on page 118.
Regulate the relationship between companies and their workers and gives workers significant rights and benefits. Equal Employment Opportunity (EEO) laws Occupational safety and health laws Wage-hour laws Benefits laws Labor relations laws
Title VII of the Civil Rights Act of 1964 Companies cannot discriminate against an
employee because of race, color, religion, sex, or national origin.
EEOC can sue a company that discriminates against an employee.
Age Discrimination in Employment Act Protects workers 40-70 years of age.
Americans with Disabilities Act Cannot discriminate based on disabilities
and illnesses (blindness or diabetes) and must provide reasonable accommodations
Sets standards for keeping workers clean and free of hazards, such as unsafe machinery and dangerous chemicals.
Businesses must keep records of employee illness, injuries, and deaths, and report them.
Occupational Safety and Health Administration (OSHA) inspectors visit workplaces every year to make sure they comply with regulations.
Fair Labor Standards Act (FLSA) (Wage-Hour Law) protects workers: Sets the. number of hours employees
can work in a week without receiving overtime pay
Prohibits companies from employing children under 14
Sets the minimum wage companies can pay their workers
Social Security ActEmployee Retirement Income
Security ActUnemployment Insurance Laws (p
124)Workers’ Compensation LawsFamily and Medical Leave Act (FMLA)
National Labor Relations Act Companies must at least listen to what
their unions say they want for their members in terms of wages, hours, and conditions of employment (such as safety in the workplace)
Unions Groups of workers who collectively
bargain for rights such as higher wages and better working conditions.
page 129Fact and IdeaCritical ThinkingCase Analysis